Russian Economy General News: #4

TheArmenian wrote:

flamming_python wrote:

TheArmenian wrote:
By the way, some of the biggest losers are the US makers: GM (Chevrolet and Opel) and Ford
Hurting the US automakers without placing sanctions

None of which is good news to Russia though, I'm afraid.

These US automobile makers employ thousands of Russians, including many fine engineers, specialists, etc...
Their pay is typically above the Russian-average, given that their activities are largely concentrated in the richer regions of the Russian Federation; e.g. St. Petersburg and Kaluga.
They also pay large amounts of tax roubles into the federal budget.

Generally agreed.
Automotive industry is one of the industries I understand very well. So, allow me to provide some information that you might find useful in the future.

- Automotive assembly plant (like the foreign maker's plants in Russia) are just assembly plants. The assembling process of a car makes only about 20% of the total costs of making an automobile. The bulk of the costs is in the design and parts used in making the car.

- Only few foreign makers in Russia have more than 40% of the parts made in Russia. Take the General Motors plants in Russia: The Chevrolet Niva is made almost entirely of Russian parts and is designed in Russia (it is a GM-Avtovaz joint venture after all). The St. Petersburg plant built cars have less than 40% Russian content. The Avtotor plant (which is Russian owned) in Kaliningrad makes GM vehicles out of CKD (complete knock down) kits with very little Russian content.

- Now, which GM vehicles are suffering the most decline in sales?
Obviously the ones made outside Russia will be suffering the most because of the decline in the Russian currency.
Next in line will be the ones assembled of kits (the Avtotor made vehicles) with little domestic content.
Followed by the St. Petersburg produced ones which have some domestic content.
Least decline in sales will be the Chevrolet Niva who's price will be affected the least (because it has the most domestic content)

Now guess what the foreign makers are doing: planning to increase the % of Russian made parts in their Russia produced automobiles.
Here is the site where I follow the Russian automotive market news (in Russian and English): http://www.autostat.ru/

Now, another automotive news piece:
We already know that Lada (Avtovaz) has restarted operations in some European countries. I have information that they have big plans for the Middle East and elsewhere. They are well known in Egypt for example. They have just signed an agreement with a dealership in Lebanon and sales will start there this year.
The decline in the Rubble value will definitely help Russian exporters.

AVISMA has signed a new contract with Boeing
Russian and American corporations plan to build a joint plant



Russia has signed a new contract for the supply of titanium components with the American Aircraft Corporation Boeing. Told the head Rostec Chemezov on Defense Industry Exhibition IDEX, held in Abu Dhabi.

In the near future Russian and American companies plan to sign a contract for the construction of the second joint plant for processing of titanium products, the general director of the State Corporation.

Currently, the only enterprise in the world, carrying out a full cycle of production of titanium components, including aircraft, is AVISMA , part of Rostec.

All civil aircraft Boeing produced using Russian titanium. Recall AVISMA and Boeing began collaborating in 1993. Today, the Russian Corporation provides up to 40% of the US company in titanium. In 2006, a joint venture to process titanium forgings Ural Boeing Manufacturing in Upper Salda.

In July 2014, Boeing and VSMPO-AVISMA eight years extended the contract for the supply of titanium . The new agreement is designed to 2022. The Russian company will continue to supply Boeing rolled titanium in the agreed annual quantities to meet the needs of the production of civil aircraft.

Company AVISMA is also a major supplier of titanium for by Airbus. The company cooperates with the world's leading aircraft and engine building companies, including: SNECMA, Rolls-Royce, Embraer, Bombardier Aerospace, PFW Aerospace GmbH, Pratt & Whitney and others. The main production sites are located in the Upper Corporation Salda (Sverdlovsk region) and Berezniki (Perm region).

AVISMA - the world's largest producer of titanium ingots and all kinds of semi-finished products made of titanium alloys, as well as large-size extruded aluminum products, semi-finished products of alloy steel and heat-resistant nickel-based alloys. Is a member of the State Corporation Rostec.

AVISMA provides up to 40% of Boeing's titanium

GarryB wrote:

Come on U.S. State Dept., why don't you put sanctions on Russian titanium? Come on I dare ya! Wink After you do, go and watch Boeing, America's 2nd largest defense conglomerate crumble in front of your eyes!!!

Much better would be the suggestion that any further US sanctions will lead to a cut in Titanium exports direct to the US... Sell it to a third party and make the US pay what ever extra the third party demands for selling it to the US...

Actually I read somewhere that some companies within the Russian MIC with serious export orders like UAC and the makers of vehicles and equipment could give the Russian military a break by cutting their production and sales to the Russian military by 10 or 15% which can then be put into other areas of the Russian economy that might need more investment or might be better not to cut.

The excess production not going to the Russian military could be sold for export for export dollars, bringing money into the economy at a time when they have production capacity and sales in US dollars are the most valuable to Russian makers... they could resume production later and make up the numbers later on...

Interesting...

higurashihougi wrote:

magnumcromagnon wrote:Come on U.S. State Dept., why don't you put sanctions on Russian titanium? Come on I dare ya! After you do, go and watch Boeing, America's 2nd largest defense conglomerate crumble in front of your eyes!!!

The West put sanction on Russia by buying Russian space rockets, oil, gas, titanium, steel, and so on.

U.S. oil oligarch put sanction on Russia by invest a huge amount of money on a cooperation project with Russia.

So on and so forth.

GarryB wrote:

Come on U.S. State Dept., why don't you put sanctions on Russian titanium? Come on I dare ya! Wink After you do, go and watch Boeing, America's 2nd largest defense conglomerate crumble in front of your eyes!!!

Much better would be the suggestion that any further US sanctions will lead to a cut in Titanium exports direct to the US... Sell it to a third party and make the US pay what ever extra the third party demands for selling it to the US...

Actually I read somewhere that some companies within the Russian MIC with serious export orders like UAC and the makers of vehicles and equipment could give the Russian military a break by cutting their production and sales to the Russian military by 10 or 15% which can then be put into other areas of the Russian economy that might need more investment or might be better not to cut.

The excess production not going to the Russian military could be sold for export for export dollars, bringing money into the economy at a time when they have production capacity and sales in US dollars are the most valuable to Russian makers... they could resume production later and make up the numbers later on...

Interesting...

GarryB wrote:

Come on U.S. State Dept., why don't you put sanctions on Russian titanium? Come on I dare ya! Wink After you do, go and watch Boeing, America's 2nd largest defense conglomerate crumble in front of your eyes!!!

Much better would be the suggestion that any further US sanctions will lead to a cut in Titanium exports direct to the US... Sell it to a third party and make the US pay what ever extra the third party demands for selling it to the US...

Actually I read somewhere that some companies within the Russian MIC with serious export orders like UAC and the makers of vehicles and equipment could give the Russian military a break by cutting their production and sales to the Russian military by 10 or 15% which can then be put into other areas of the Russian economy that might need more investment or might be better not to cut.

The excess production not going to the Russian military could be sold for export for export dollars, bringing money into the economy at a time when they have production capacity and sales in US dollars are the most valuable to Russian makers... they could resume production later and make up the numbers later on...

Interesting...

China accounting for 10.7 MMbbl/d of the total increase. As China's economy moves from dependence on energy-intensive industrial manufacturing to services, the transportation sector becomes the most significant source of growth in liquid fuels use, and the country's liquid fuels consumption more than doubles from its 2010 level. In the Reference case, China replaces the United States as the world's largest consumer of liquid fuels by 2035 (Figure 7).

The gap between India’s oil demand and supply is widening, as demand reached nearly 3.7 million barrels per day (bbl/d) in 2013 compared to less than 1 million bbl/d of total liquids production. EIA projects India’s demand will more than double to 8.2 million bbl/d by 2040

Energy Strategy of Russia until 2035 is not intended to reduce the volume of oil production, but change the structure of production in the region. This was reported by the TV channel "Russia 24" Russian Energy Minister Alexander Novak.

"We do not expect a decline in production, they will be at the level of 525 million tons of oil by 2035," - he said.

MOSCOW, March 2. /TASS/. The Russian Ministry of Finance expects the $30 billion capital outflow in Q1, Finance Minister Siluanov said on Monday.

"Concerning the capital outflow, we expect it as totaling about $30 billion in the first quarter and $90-100 billion in annual terms. This is slightly lower than our assumption in the outlook, which was equal to $120-130 billion," the minister said. The said figure covers $60-70 billion of foreign debt repayments, Siluanov added.

GarryB wrote:Only do it to the west.

The US can still buy Russian Titanium... it is just that they have to buy it through third parties, which should make it more expensive.

Why Should the US get away with effecting the Russian economy with unilateral sanctions for a crime they commit every other year... I mean interfering in a conflict zone is what the US does.... and no one punnishes them for that yet they repeatedly punnish other countries for not obey their rules even when they don't follow them themselves.

Personally I support any Russian action that will further separate Russia from the west in general because the west is not a good trading partner and Russia cannot afford to become dependent on the west as the west will always be unreliable.

The company president noted that the devaluation of the ruble has had a positive effect in strengthening the competitiveness of his company's products, both externally and internally. "The devaluation of the ruble is good for Russian producers because the share of foreign competitors in the market is decreasing, since their equipment has doubled in price. Accordingly, our cost competitiveness increases."

MOSCOW, March 3. /TASS/. Russia’s Reserve Fund set up to accumulate surplus oil revenues and cushion the budget against a sharp fall in oil prices decreased by 19.5% in February to 4.721 trillion rubles ($75.75 bln) by March 1 from 5.865 trillion roubles ($85.09 billion) as of February 1, the Finance Ministry said on Tuesday.

Russia’s National Welfare Fund established to help the government implement pension reform dropped by ten percent in February to stay at 4.591 trillion rubles ($73.66 billion) as compared to 5.1 trillion roubles ($74.02 billion) a month ago, the ministry said.

The State Statistics Service registered the highest level of the Reserve Fund at $137.34 billion (12.5% of the GDP) in February 2009, while the lowest level was at $25.21 billion (1.4% of the GDP) in January 2012.

The highest level of the National Welfare Fund was at $93.38 billion (7% of the GDP) in November 2009, while the lowest level was at $31.92 billion (1.9% of the GDP) in September 2008.

Since the beginning of the year, the Reserve Fund has lost 4.5% and the National Welfare Fund has lost 4.6%.

On January 15 - February 28, 2015 the Reserve Fund's investment losses were estimated at 4.13 billion roubles ($66 million), the National Welfare Fund's losses were at 2.45 billion roubles ($39 million).

Russia’s international reserves are highly liquid foreign assets managed by the Central Bank of Russia. They comprise foreign currency, Special Drawing Rights (SDRs), a reserve position in the International Monetary Fund and monetary gold.

Russia’s international reserves fell by $124.135 billion or 24.4% in 2014 to $385.46 billion as of January 1, 2015.

Austin wrote:Vedimosti mentioned Reserve Fund would drop to as low as 500 billion roubles in 2017.

Is Printing Rouble an option to loosen liquidy crunch at some point in time , How about printing says 5 trillion roubles more .......will this seriously impact inflation ?